A wealth gap describes a difference in average wealth between groups. The racial wealth gap refers to the extreme difference in wealth between white households and non-white households, in particular black, Hispanic/Latino and Native American households.

The racial wealth gap is a product of many factors from historical oppression of people of color to continued discrimination in the modern day. It is a legacy of a whole history of exclusion and repression that prevented people of color from gaining both wealth and property as well as the knowledge and education needed to access wealth in the first place.

The racial wealth gap isn't just about savings or trust funds. It's about the every day things, like owning your own home, owning a car, earning more than minimum wage, being able to manage or limit debt, whether you can afford to send your kids to college, and more. White families are more likely to be able to take these things for granted or be able to easily get the help needed to achieve them.

The most obvious factor in wealth disparities today is the long-term effects of slavery on the livelihood of Black Americans. Slaves were prevented from owning their own property and so, after emancipation, despite being legally free, former slaves had no wealth or property to support themselves. While there had been promises of economic support for freed slaves, General Sherman's "40 acres and a mule" being one of the most famous ones, the actual follow up was scattered, promises not well enforced if at all, and ultimately very minimal. For example, the Freedman's Bureau was established by Congress in 1866 to help former slaves by protecting their rights, providing basic needs and education, and pushing for land redistribution. However, the Bureau was underfunded, restricted by President Andrew Johnson, and it's agents were often harrassed by bigots in the community. In the end it was disbanded in 1872. The end of Freedman's Bureau was the beginning of the end of the post civil war Reconstruction period and attempts to provide a more equal transition out of slavery.

"Until the Civil Rights Act of 1964, Jim Crow laws continued segregation in the south. They detailed what jobs blacks could take and how much they could be paid. They restricted where blacks lived and traveled. Public parks, transportation, and restaurants were segregated. Even some towns were off limits to blacks. "

Under segregation, people of color faced extreme barriers to financial development. With discrimination legalized, people of color had restrictive job prospects, were cut off from living in certain areas or neighborhoods, and were unable to access certain services like schools, banks, or hospitals that would have offered support. Those services that did exist for people of color were often underfunded and not able to meet all the needs of the community.

Throughout history, both federal and state governmental policies have often excluded people of color, especially Black Americans, from important programs and public benefits. Two such programs that have had a big impact on the development and maintenance of wealth in America today were Social Security and the GI Bill.

"In 1935, the Social Security Act excluded farm workers and domestic workers from accruing benefits. At that time, most blacks still lived in the U.S. south, where they were more likely to be farm workers and domestic workers. As a result, two-thirds of blacks never received Social Security's wealth-building opportunities.

In 1948, President Harry Truman ordered integration in the military. The G.I. Bill of Rights assisted veterans with housing, education, and jobs. Between 1944 and 1971, it spent $95 billion on benefits.¹⁰ But it was left to the states to administer. As a result, black veterans in the South were often denied access."

Social Security has played a huge role in supporting the wealth accumulation of American families by helping promote retirement and providing needed financial support to community elders. The G.I. Bill gave many families their first chance at home ownership and a college degree. By excluding people of color, these policies prioritized white families and their needs, exacerbating existing disparities.

One of the major ways that any family can build wealth is through home ownership. Yet, non-white families have regularly been prevented from buying their own homes due to policies like racially restrictive covenants and redlining.

Covenants are rules instated in the deeds to certain houses, or in the restrictions created by local Homeowners Associations. Racially restrictive covenants were added to homes and neighborhoods that banned the sale of these homes to people of color. While these covenants may be illegal now, they still exist in spirit after years of racially-biased restrictions.

Redlining is a term that refers to the policies put in place by mortgage and loan lenders in the mid-1900s. These policies designated some neighborhoods as 'green' or good places to lend too, and some areas as 'red' or dangerous to lend too. Families in 'red' areas were denied loans and mortgages and thus were unable to afford better homes. The racial make up of neighborhoods was one major factor that the lenders used to determine which areas were 'red' or 'green.'

Here are two short videos about the history of housing discrimination and redlining:

The one the biggest factors that has maintained the racial wealth gap is employment and income discrimination. Black, Latino and Indigenous people of color find it harder to get jobs that earn more than minimum wage. As one of the charts below shows, people of color tend to be overrepresented in low paying, hourly work. They may face racism or constant rejections when trying to get promoted, get a raise, or find better paying jobs. Even people with college or graduate degrees face these structural and social barriers. On average, this means people of color make less money than white people.

Some recent research argues that since the 1960s, a major factor preventing the shrinking of the wealth gap has been this difference in income. While the wealth accumulation of previous generations is also important and has played a big role, this income gap is what stops families of color from accumulating new wealth of their own and thus perpetuates the wealth gap.

Financial stability is a key factor for being able to build wealth. Two elements that help with financial stability are: 1) knowledge and understanding of financial topics and 2) the ability to access financial services like banks, credit cards, loans and more. Without financial education and access to banks and other services, people may struggle or end up making decisions that hurt them in the long run.

People who are underbanked tend to be low income, are more likely racial or ethnic minorities and are more likely to have a family member who is disabled. For example, over 14% of families with income under $40,000 a year are underbanked while only 3% of families with higher incomes are underbanked.

There are two major reasons for this gap:

• 52.7% of underbanked families stated that they did not have enough money to keep in an account (and another 30% of families couldn't afford the fees typically associated with banking)

• 30.2% of these households claimed they “don’t trust banks”

Families in minority communities who have experienced discrimination are less likely to be interested in or trust institutions like banks. However, the other financial services that these families will need to use in order to get by (like payday loans, prepaid cards, and credit cards) are much less stable and often end up costing more in fees and interest in the long run. The inaccessibility of some financial services can be a barrier in helping low income families build wealth.

Policies to support that aim to reduce the racial wealth gap:

1. 1. 1. Progressive Taxation

         1. 1. Progressive taxation is a system that taxes people at higher income brackets more than people in lower income brackets. It would result in tax cuts for people with lower income which would free up money for low income families. This system would also increase potential funding for government program and benefits by raising more taxes from families that can afford it.

            2. Here's an article about this policy idea: https://www.brookings.edu/research/closing-the-racial-wealth-gap-requires-heavy-progressive-taxation-of-wealth/

      2. Raising Minimum Wage/Income

         1. 1. As mentioned earlier, the pay gap is one major reason that the racial wealth gap continues to be an issue. Raising the minimum wage, and thus increasing the income of many people of color, could be a key way to start addressing the income gap.

            2. Here's an article about minimum wage, it's history and arguments for and against raising it: https://www.thebalance.com/us-minimum-wage-what-it-is-history-and-who-must-comply-3306209

      3. Improving Access to Education for all

         1. 1. As mentioned earlier, education helps people move out of poverty by helping them access more high paying jobs. Ensuring that people from all backgrounds and communities have equal access to education is very important. This goal can be achieved through policies like ending student debt, decreasing the cost of tuition, and the continuation of services like the Benefits Hub which help people get the resources they need to make it through college.

            2. Here's United Way of King County's webpage about the Benefits Hub/Bridge to Finish program: https://www.uwkc.org/helping-students-graduate/bridge-to-finish/.

      4. Bonds for Babies

         1. 1. This idea suggests that the government help create trust funds for infants and young children with amounts determined by the families economic position. These trust funds would be protected by the government and opened for the recipient to use once they turned 18.

            2. This policy idea is mentioned in: https://www.thebalance.com/racial-wealth-gap-in-united-states-4169678

      5. Enforce anti-discrimination policies against both obvious and hidden discrimination

Organizations to Support or Volunteer for:

1. 1. 6. Urban League of Metropolitan Seattle: https://urbanleague.org/volunteer/

         1. 1. The Urban League is a community organization focused on empowering African Americans and other diverse underserved communities by providing educational and economic opportunities. Envisioning equity for all, their programs cover housing, education, workforce development, health care and health education, and policy and civic engagement.

      7. Bank On Washington https://bankonwashington.org/

         1. 1. Bank On Washington is a coalition of community financial organizations and institutions that have come together to support financial education and opportunities for all. They are working on programs that offer free or low cost financial services like financial coaching and banking.

What can you do personally:

1. 1. 8. Join the Buy Black Movement

         1. 1. Support businesses owned by people of color over big corporations like Amazon or Walmart when you can

            2. Learn more: https://www.voxmagazine.com/city/supporting-black-owned-businesses/article_c26af25e-b7d8-11ea-926c-ff4498721079.html and https://www.revolt.tv/2020/8/25/21401293/support-black-businesses

Looking at all this information, it can be hard to feel like there's much any one person can do to help change the system and eliminate the racial wealth gap. However, even the world isn't going to change in a day, there's always something you can do, whether that's working to build your own awareness and understanding or working to better your own situation.

Here's a couple things you can do for yourself:

“Keeping up with the Joneses” is an old idiom that refers to comparing yourself to those around you in order to determine your social status, but we shouldn’t be sacrificing our financial security just to keep up with other people’s highlight reels.

With social media more present than ever, the pressure of keeping up is even stronger. It has people thinking they are doing life wrong that they are not living their best life. There's nothing wrong with living your best life or treating yourself, but do so in a way you can stay true to yourself and what is important to you rather than just keeping up.

Here are 3 ways you can do this:
1. Get clear with what your values are
2. Plan, plan, plan ahead for the things you want
3. Surround yourself with like-minded individuals

Bottom line: focus on value not flash.

Visit the Benefits Hub! Open to all UW Bothell/Cascadia students, through us, you can get support for your everyday life expenses and learn more all kinds of financial topics. Here's a few of our common programs:

• Housing Support:

  • • Need money for rent or to move into a new place?

    • Want advice for how to find a place when you're moving out for the first time?

    • Looking for help with your utilities bills?

• Public Benefits Access

  • • Get screened for state and government benefits for low income people like: grocery/food assistance, low cost health insurance, utility bill assistance, family care assistance, and others

• Budgeting, Savings Plans, Credit Information

  • • Talk to a financial coach about your situation to get advice and ask any questions you might have.

    • Here's a downloadable, our basic Student Saving Tracker "Sinking Fund": https://drive.google.com/file/d/1_lCy6qs3kEB9mF2wOYzR-N3BL1rvxqL3/view?usp=sharing

If you're looking for other resources, here's a few financial education websites created by people of color!

1. 1. 1. 1. https://blackwallet.org/

         2. https://www.clevergirlfinance.com/

         3. https://blackfem.org/about/

Here are some resources relating to the racial wealth gap for further education:

1. Video: Netflix's Explained: Racial Wealth Gap

   1. 1. https://www.youtube.com/watch?v=Mqrhn8khGLM

2. Article: Ta-Nehisi Coates, “The Case For Reparations"

   1. 1. https://www.theatlantic.com/magazine/archive/2014/06/the-case-for-reparations/361631/

3. Video: Kimberly Jones & David Jones Media, "How Can We Win"

   1. 1. (Video also linked at bottom of page) https://www.youtube.com/watch?v=sb9_qGOa9Go

4. Article: Urban Institute, "Nine Charts about Wealth Inequality in America"

   1. 1. https://apps.urban.org/features/wealth-inequality-charts/

5. Article: Inequality.org, "Racial Economic Inequality"

   1. 1. https://inequality.org/facts/racial-inequality/

6. Exhibit: UW Seattle Civil Rights and Labor History Project, "Segregated Seattle"

   1. 1. https://depts.washington.edu/civilr/segregated.htm

      2. For a narrated slideshow about the history of segregation and housing discrimination from this project, see this page: https://depts.washington.edu/civilr/slides_segregation-story.htm

7. Video: 13th

   1. 1. A documentary about racial inequality in the US prison system, a topic that intertwines with the issue of the racial wealth gap.

      2. https://www.youtube.com/watch?v=krfcq5pF8u8